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The purpose of this paper is to emphasize that interest-rate benchmark cannot be used for pricing of Islamic financial products. This paper will help in pricing basis for Islamic financial products, which are currently based on interest-rate benchmarks. Shariyah perspective and ground realities are considered as evident to the viewpoint.

Viewpoint has been evident through comparison of conventional and Islamic financial product pricing, and through comparison of interest rate with macroeconomic indicators to analyze whether interest really represent economy, since Islamic finance based on real economic activities.

It has been analyzed that interest based benchmarks do not represent real economic activities.

This paper brings new light to the product development in Islamic financial instruments and institutions. Islamic finance should have its own footings in terms of product development.

The purpose of this paper is to find applicable Islamic pricing benchmarks (IPBs) instead of the market interest rates which are currently used in Islamic finance as benchmark.

The suggested model (Islamic pricing benchmark model (IPBM)) obviously reveals the feasibility and practical effectiveness of a substitute to London Interbank Offered Rate (LIBOR) and as an evaluator tool to suggested investment projects. The model is a suggested mechanism which could be used as an alternative choice to the conventional borrowing based on the forbidden Riba or on interest. The suggested IPBM depends on estimating the rate of return for any project on consideration of the cash flows in future which is expected to be relative to the invested capital.

The IPBM approach might be applied to financial tools, where the fund owner bears the loss since it is not because of negligence. An instrument to help identify the investment for target rates of return (as an alternative choice to LIBOR) to identify a breakeven point based on expected cash flows for the project to be financed instead of based on seeking the indicators of interest or Riba (as LIBOR). This feature of the IPBM model as an Islamic benchmark renders it as a Shariah pricing mechanism for the Islamic financial products.

The IPBM could be used as a financial instrument to assist in identifying the investment for the target return rates to determine a breakeven point based on expected cash flows for the project to be funded instead of being based on seeking the interest indicators or Riba (as LIBOR). This feature as an Islamic benchmark is considered as a Shariah pricing mechanism for the Islamic financial products. In particular, the proposed model incorporates the Shariah parameters. In that, it is hoped that the Islamic financial instruments will be more comprehensive in their Shariah compliance and thereby may bring more credibility to the Islamic financial system in general.

This paper highlights several important issues related to the IPBMs in Islamic financial institutions which are not widely discussed among researchers. This study contributes to finding an alternative IPB for the Islamic financial products which is currently using the conventional interest rate (LIBOR) as its benchmark. The current study provides empirical evidence for the possibility of relying on the IPBM as an Islamic benchmark to price Islamic financial transactions.

The purpose of this paper is to empirically analyze the transmission mechanism between benchmark interest rate of financial market, money market interest rate and capital market yields in order to reveal the dynamic evolution characters and core influential structure between different market interest rates.

Using Dirichlet-VAR (DVAR) model, this study analyze the relationship between markets rates according to the equilibrium model in money market and capital market.

Empirical results show that the interest rate transmission mechanism functions smoothly between interest rates of different levels. Interest rate of bills issued by the central bank can effectively reflect changes in monetary policy and guide the fluidity of market, playing the anchor role in interest rate pricing. There exists a closed loop feedback between interest rate of bills issued by the central bank, and money market interest rate, as well as between money market interest rate and bond market interest rate. The former is a loop by administrative means while the latter is the one mainly affected by market-oriented means. The response by money market and bond market toward the change of benchmark interest rate is unsymmetrical as money market is more sensitive to a loose monetary policy while bond market is more sensitive to a tight monetary policy. Stock market is strongly affected by uncertainty of benchmark interest rate.

DVAR model is the extension of research on instable data and multiple variable causality test, which expands the causality analysis between two variables to multiple variables causality impact analysis which contains non-stable and structurally instable economic data.

The question is whether debt market investors see through managers' attempts to hide their pension obligations. The authors establish a robust relation between understated pension liabilities and corporate bond yield spreads after controlling for factors that have been previously identified as having a significant impact on firms' cost of borrowing. The results support the idea that bond market investors are not being misled by the use of high pension liability discount rates by some companies to lower their reported pension obligations. For a small fraction of debt issuers, the reported pension liabilities are larger than the pension liabilities valued at the stipulated interest rate benchmarks. For these issuers with overstated pension liabilities, bond investors adjust their borrowing costs downward.

The authors investigate the relation between corporate bond yield spreads and understated pension liabilities relative to long-term Treasury and high-grade corporate bond yields. They aim to answer two questions. First, what are the sizes of over or understated pension liabilities relative to guideline benchmarks? Second, do debt market investors see through the potential management manipulation of pension discount rates? The authors find that firms with large understated pension liabilities face higher marginal borrowing costs after taking into account issue-specific features, firm characteristics, macroeconomic conditions and other pension information such as funded status and mandatory contributions.

The average understated projected benefit obligations (PBOs) are understated by $394.3 and $335.6, equivalent to 3.5 and 3.0% of the beginning of the fiscal year market value, respectively. The average understated accumulated benefit obligations (ABOs) are understated by $359.3 and $305.3 million, equivalent to 3.1 and 2.6%, of the beginning of the fiscal year market value, respectively. Relative to AA-grade corporate bond yields, the average difference between firm pension discount rates and benchmark yields becomes much smaller; the percentage of firm pension discount rates higher than benchmark yields is also much smaller. As a result, understated pension liabilities become negligible. The authors establish a robust relation between corporate bond yield spreads and measures of understated pension liabilities after controlling for issue-specific features, firm characteristics, other pension information (funded status and mandatory contributions), macroeconomic conditions, calendar effects and industry effects.

S&P Rating Services recognizes the issue that there is considerably more variability in discount rate assumptions among companies than in workforce demographics or the interest rate environment in which firms operate (Standard and Poor's, 2006). S&P also indicates that it would be desirable to normalize different discount rate assumptions but acknowledges that it is difficult to do so. In practice, S&P Rating Services conducts periodic surveys to see whether firms' assumed discount rates conform to the normal standard. The paper makes an initial attempt to quantify the size of understated pension liabilities and their impact on corporate bond yield spreads. This approach can be extended to study firms' costs of equity capital, the pricing of seasoned equity offerings and the pricing of merger and acquisition transaction deals, among other questions.

The purpose of this study is to evaluate the Islamic Interbank Benchmark Rate (IIBR) and investigate its relationship to conventional benchmark rates.

The methodology in this study relies extensively on multivariate regression and Granger Causality analysis, using data culled for IIBR, conventional interest-dependent benchmark rates and oil prices which were collected daily over a period spanning from November 2011 to June 2015.

The main finding of this study is that there is significant negative correlation between the IIBR and London Interbank Offered Rate (LIBOR) and other conventional interbank benchmark rates. This negative linear relationship is due to the IIBR representing a substitute investment for international investors when traditional rates fall in relation to the IIBR.

This study seeks to bring research on IIBR and Sharia finance into the mainstream. It provides new insights into the IIBR as an independent interbank benchmark rate, exploring and confirming its status as a Sharia complaint financial tool.

This study is a comprehensive investigation of the relationship between the IIBR and conventional counterpart benchmark rates (LIBOR, Kuala Lumpur Interbank Offered Rate [KLIBOR], Effective Federal Funds Rate [EFFR] and conventional rates in GCC countries). The study contributes to the understanding of the IIBR’s framework principles and its value as a solution to current and future Sharia-complaint short-term interbank market funding for the Islamic finance industry.

The purpose of this study is to evaluate the Islamic Interbank Benchmark Rate (IIBR) and investigate its relationship with conventional benchmark rates.

This study relies extensively on multivariate regression and Granger causality analysis, using data culled for the IIBR, conventional interest-dependent benchmark rates and oil prices. The data was collected daily over a period spanning from November 2011 to June 2015.

The main finding of this study is that there is a significant negative correlation between the IIBR and London Interbank Offered Rate (LIBOR) and other conventional interbank benchmark rates. This negative linear relationship is due to the IIBR representing a substitute investment for international investors when traditional rates fall in relation to the IIBR.

This study seeks to bring research on the IIBR and Sharia finance into the mainstream. It provides new insights into the IIBR as an independent interbank benchmark rate, exploring and confirming its status as a Sharia complaint financial tool.

This study is a comprehensive investigation of the relationship between the IIBR and conventional counterpart benchmark rates (LIBOR, Kuala Lumpur Interbank Offered Rate, effective federal funds rate and conventional rates in the Gulf Cooperation Council countries). The study contributes to the understanding of the IIBR’s framework principles and its value as a solution to current and future Sharia-complaint short-term interbank market funding for the Islamic finance industry.

This paper aims to address a specific question over the compatibility of International Financial Reporting Standards with Islamic finance regarding the use of interest rate as discounting rate in impairment testing and valuation techniques.

Inductive methodology and qualitative-narrative methods are used to explore the available texts and literature.

There are two main findings: first, the use of reference rate obtained in non-Islamic financial system is inappropriate from the Islamic perspective. Interest-based valuation techniques have not been adopted by the Accounting and Auditing Organization for Islamic Financial Institutions in its adaptation of conventional accounting practices, and the majority of Islamic scholars argue against Interest rate benchmarking. Second, the authors suggest nominal gross domestic product (NGDP) growth rate as an alternative benchmark because Islamic finance, in its ideal sense, is based on and closely linked to the real sector. Moreover, recent studies show that there are no statistical differences between NGDP growth rate and nominal interest rate for most of the countries studied.

This paper highlights the accounting implications of the prohibition of interest for valuation techniques and raises the need of acceptable alternative pricing benchmark.

This paper aims to understand the issue of interest rate benchmarking in Islamic financial institutions (IFIs) from a macro-economic perspective and assessing the relevance of creating a Sharīʿah-compliant profit rate benchmark to solve this issue. This paper also aims at suggesting an Islamic alternative that will handle both the negative economic impact on IFIs as well as on their financial performance.

The paper is based on literature review of conventional finance and Islamic finance theories to construct a theoretical model to assess the impact of interest rate benchmarking on the ability of IFIs to achieve the objectives of the Islamic economy.

The macro-economic perspective concludes that conceiving a profit rate benchmark for the Islamic finance industry is not relevant to raising the Sharīʿah credibility of the industry. Indeed, several adjustments need to be introduced in terms of the business model.

The recommendations of this paper require the involvement of financial authorities and governments for their implementation. Indeed, the adjustments require a macro-economic review.

The paper considers a profit rate benchmark irrelevant and inefficient. Instead, it suggests the necessary adjustments in terms of business model and economic approach for IFIs to achieve their objectives.

The paper considers zakat implementation and the adjustment of IFIs as the real path to implement a fair wealth distribution in the society.

The creation of a profit rate benchmark has always been the only solution for the pricing issue in IFIs. This paper challenges this idea and tries to give a deeper understanding of the situation.

After loan interest rate upper limit deregulation in October 2004, the financing environment in China changed dramatically, and the banks were eligible for risk compensation. The purpose of this paper is to focus on the influence of the loan interest rate liberalization on firms’ loan maturity structure.

Based on Rajan's (1992) model, the authors constructed a trade-off model of how the banks choose long-term and short-term loans scales, and further analyzed banks’ loan term decisions under the loan interest rate upper limit deregulation or collateral cases. Then the authors used an unbalanced panel data set of 586 Chinese listed manufacturing companies and 9,376 observations during the period 1996-2011 to testify the theoretical conclusion. Furthermore, the authors studied the effect on firms with different characteristics of ownership or scale.

The results show that the loan interest rate liberalization significantly decreases the private companies’ reliance on short-term loans and increases sensitivity to interest rates of state-owned companies’ long-term loans. But the results also show that the companies’ ownership still plays a key role on the long-term loans availability. When monetary policy tightened, small companies still have to borrow short-term loans for long-term purposes. As the bank industry is still dominated by state-owned banks and the deposit interest rate has upper limits, the effect of the loan interest rate liberalization on easing long-term credit constraints is limited.

From a new perspective, the content and findings of this paper contribute to the study of the effect of the interest rate liberalization on China economy.

We analyze the impact of monetary policy instruments on interbank lending rates and retail bank lending in China using an extended version of the model developed by Porter and Xu (2009). Unlike the central banks of advanced economies, the People’s Bank of China (PBoC) uses changes in the required reserve ratios and open market operations to influence liquidity in money markets and adjusts the regulated deposit and lending rates and loan targets to intervene in the retail deposit and lending market. These interventions prevent the interbank lending rate from signaling monetary policy stance and transmitting the effect of policy to the growth of bank loans. Since the global financial crisis, the PBoC’s monetary policy has gone through a full cycle. The combining effects of using different policy instruments simultaneously within a short period of time were quite effective in bringing the credit and money growth in line with its desired level. Most recently steps have been taken to speed up the interest rate liberalization. Effective July 2013, the PBoC removed the floors of the benchmark lending rates.